Jack Welch

During Jack Welch's twenty years as the leader of General Electric,
he became one of the best-known business leaders in the world. He made GE
more profitable and more valuable by making its management structure less
complicated and by focusing on the businesses where the company was most
efficient. Some of his methods attracted a lot of criticism. But there are
few corporate leaders who have received as much publicity or as much
admiration as Jack Welch.

"Dealing with the best team wins. This whole idea—whether
it's a hockey team, a baseball team or a business—is the
same: if you have the best team, you win."

Climbing the GE Ladder

John Francis Welch Jr., known as Jack, was born in 1935 in Peabody,
Massachusetts. His father John worked for the Boston & Maine
Railroad as a conductor and was often away from home because of his job.
Jack's mother Grace was a strong force in the early life of her
only child. She encouraged Jack to do many things on his own, such as go
to baseball games in the city alone, in order to make him independent. She
also made him realize he could succeed in life, in spite of the fact that
he spoke with a stutter and was one of the smallest kids in his
neighborhood. She always stressed the importance of education.

After graduating from high school, where he played four sports, Welch went
to the University of Massachusetts at Amherst to study chemical
engineering. He graduated in 1957 and went on to the University of
Illinois for his masters and doctorate degrees. Immediately after he
completed his studies in 1960, he took a job with General Electric, at a
plant in Massachusetts. Managers there noticed he had an unusual
combination of scientific knowledge and business sense. He also gained a
reputation for rubbing people the wrong way at times, but his success at
his job earned him the respect of his bosses.

Welch moved up quickly through GE, becoming general manager of the
company's plastics division and turning it into one of the leading
players in that industry. He became a vice president of General Electric
in 1972 and moved to GE's consumer goods and services division in
1977. He became a vice chairman in 1979 and was assigned to the GE Credit
Corporation. This was where he really made his mark. He got the division
to grow by entering into new businesses; his results were soon noticed by
top GE executives.

Neutron Jack

In 1981, Welch was named CEO and chairman of GE, becoming the youngest
person ever to achieve this position at the company. He realized from the
start that he needed to make some changes in order to stay competitive. He
decided to reorganize the company by focusing only on those businesses
that were strongest. During the course of this streamlining process, he
laid off 135,000 GE employees—25 percent of the company's
workers. By letting go of more than one hundred thousand workers after
taking over the leadership of GE, Welch earned the nickname
"Neutron Jack." The name comes from the neutron bomb, which
wipes out all life but leaves buildings standing.

Jeffrey R. Immelt, the man who eventually replaced Jack Welch as CEO of
General Electric in 2001, told
People
magazine that working for Welch could be "fun" or it
could be "terrifying."

Businesses that were not ranked number one or number two in their
industries were given an ultimatum to improve
or be shut down. In the next five years, GE closed 73 plants and offices
and sold 232 businesses. Meanwhile, all of GE's various companies
were organized into three umbrella groups: manufacturing, services, and
technology.

While Welch's early moves as CEO were controversial, people soon
saw that his tactics made the company grow and become more efficient.
Opinions of him began to improve. His reputation was also helped because
he believed in placing some of the decision-making power with the workers
on the factory floors, rather than leaving it all to management. This
helped the company act on good ideas that managers might not have
considered, and also improved the workers' morale.

At the same time that Welch was letting go of less profitable businesses,
such as television sets and mining, he was buying companies in industries
where he saw potential. Some of his purchases included the investment bank
Kidder Peabody, the chemical company Borg-Warner, and RCA, the parent
corporation of the television network NBC. The last deal, which cost $6.4
billion, was the largest merger outside the oil industry up to that time.

A Few Stumbles

Some of Welch's deals ending up causing headaches for Welch and for
General Electric. When it was purchased NBC was the leader in television,
but it started to lose ratings because of increased competition,
especially from cable television networks. One of Kidder Peabody's
top executives was put in jail for making deals based on information that
was not public, known as "insider trading." Other scandals
also occurred within the company during this period.

Many members of the press and competing corporate executives questioned
Welch's decisions. For example, GE suffered a $120 million loss
because Welch decided to move into the business of making automation
equipment for factories, but then could not find enough customers to
purchase the company's products. He also stayed out of some
lucrative businesses that could have boosted company revenues. For
example, he turned away from developing magnetic levitation (maglev), a
new transportation technology, preferring to remain involved
in traditional railroad equipment, which was not a growing industry.

Despite these setbacks, Welch's reputation as an admired business
leader grew. His methods of managing, which allowed employees to have a
say in management decisions, were embraced by many other companies. Welch
put company-wide quality initiatives in place and pushed GE to the
Internet as a means to make the company more efficient. Probably the most
significant factor in Welch's good reputation came from the fact
that GE's value grew strongly throughout his twenty years as CEO.

At the end of Welch's career, he suffered a big business
disappointment. He wanted to purchase Honeywell International, which made
electronic equipment for airplanes. Its business fit well with GE's
airplane-engine manufacturing operations. The two companies worked out the
details for what would be history's largest industrial merger. The
snag came when the newly formed European Union, the government that
oversees matters affecting most of the countries in Europe, refused to
grant permission for the merger. The EU required too many changes for GE
and Honeywell to accept, so the deal fell apart.

The End of a Long Career

Welch retired from General Electric in 2001. His memoir,
Jack: Straight from the Gut,
which was one of many books Welch wrote over his career, became a
best-seller as executives looked to his words of advice. Welch's
personal reputation suffered in 2002, however, when an editor at the
Harvard Business Review,
Suzy Wetlaufer, announced she was having an affair with the former CEO.
Welch and his second wife, Jane, divorced shortly after the affair came
out in the news. Welch had married Jane in 1989 after divorcing his wife
of thirty years, Carolyn, in 1987.

At the time of jack Welch's retirement in 2001, GE was the most
valuable company in the world. Financial analysts estimated it was worth
$490 billion. When Welch took over the company two decades earlier, the
value was $14 billion.

Despite this scandal, Welch's reputation as one of the most admired
and well-known business leaders in U.S. history—and probably in the
world—is likely to stay intact.
Newsweek
magazine, while questioning what the Wetlaufer affair would do to his
reputation, noted that Welch was considered the best manager in the last
50 years—high praise for a business leader.

For More Information

Books

Campbell, Robert.
The Golden Years of Broadcasting: A Celebration of the First 50 Years
of Radio and TV on NBC.
New York: Rutledge/Charles Scribner's Sons, 1976.

Slater, Robert.
The New GE: How lack Welch Revised an American Institution.
Homewood, IL: Business One Irwin, 1993.

Sobel, Robert.
RCA.
Briarcliff Manor, NY: Stein and Day, 1986.

Weaver, Pat, with Thomas M. Coffey.
The Best Seat in the House: The Golden Years of Radio and Television.
New York: Alfred A. Knopf, 1994.

Welch, Jack, with John A. Byrne.
Jack: Straight from the Gut.
New York: Warner Books, 2001.